New Delhi, April 19, 2018
The tax season in underway and advisories from the Income Tax department are coming in thick and fast.
First came the carrot: Claiming to "trust" taxpayers, the taxman in February had announced that it would not issue a demand notice in cases of a minor mismatch between one's filed income tax returns (ITR) and the corresponding tax credit data collected from banks and other financial institutions. That was welcome news for the salaried class, often harried by the additional paperwork generated by such demand notices.
Now comes the stick. The taxman has cautioned salaried class taxpayers against using illegal tricks while filing their returns, like under-reporting income or "inflating" deductions and permitted exemptions. The "cautionary advisory" issued yesterday by the department's Bangalore-based Central Processing Centre (CPC) - which receives and processes the ITRs - added that such taxpayers should not "fall prey" to unscrupulous tax advisors or planners promising to help prepare false claims to get tax benefits.
Violators will not only be prosecuted - wrong claims would be treated as cases of tax evasion, which is "punishable under various penal and prosecution provisions of the Income Tax Act" - but their employers will also be intimated. "In the cases of such wrong claims by the government/PSU employees, reference would be made to the concerned vigilance division for action under conduct rules," said the advisory.
Want to know how the taxman sniffs out such discrepancies? According to the advisory, the income tax department possesses an "extensive risk analysis system", which is automated with no human interface and designed to flag-off persons who are non-compliant. "In all such cases of high risk, the department may examine and verify the details submitted by taxpayers in their ITR subsequent to the processing of returns," it added.
Senior taxmen told The Times of India that the advisory was issued after surveys threw up evidence of several such malpractices in Bengaluru, Mumbai and Ludhiana. According to them, some salaried employees were claiming tax benefits for house property despite not owning any property. Then there were instances of some people claiming deductions for donations or contributions to certain institutions when none were actually made.
The biggest such racket was unearthed in Bangalore by tax sleuths in January. The department has alleged that employees of several bellwether companies in connivance with a chartered accountant in the country's IT capital had been filing false ITRs and making fraudulent refund claims for multiple years. The CA, who has since reportedly been disowned by the Institute of Chartered Accountants of India, had filed "nearly 1,000 returns with loss from house property, aggregating to loss claim of Rs 18 crore" according to the department. It had further alleged that employees of several reputed companies, including IBM, Vodafone, Infosys, ICICI Bank, CISCO and Thomson Reuters, had resorted to such fraudulent claim of refunds. The CBI recently registered a criminal case to probe this nexus.
This goes a long way in explaining why the latest ITR forms released by the Central Board of Direct Taxes (CBDT) suddenly sharpened scrutiny of taxpayers, especially salaried ones. To remind you, for the first time, salaried taxpayers will have to share their salary breakup - the new forms seek an assessee's details such as allowances not exempt, profit in lieu of salary and value of prerequisites, among others, in separate fields. They also need to give details of properties and income from them.
"If any person has made a false claim in the I-T returns resulting in lower tax payment/unjustified refund, they are advised to take immediate steps to file revised returns disclosing the correct income and paying due tax," said the advisory.
It also asked tax planners and advisors to "confine their advice to taxpayers within the four corners of the IT Act" and warned that violators will be prosecuted and enforcement agencies like the CBI and the Enforcement Directorate (ED) will come knocking.